Liu, 56, has held posts as mayor and Party chief at various levels and in different cities, and worked his way up to become vice-chairman of the Chinese People's Political Consultative Conference's Lyuliang committee.
Also under investigation is Wang Jianguo, 49, the mayor of Xiaoyi. He is also a native of Shanxi.
Liu drew scrutiny after a string of corruption revelations in Shanxi since the beginning of the year, all related to money from coal mines. Seven officials at the provincial level in Shanxi, including Jin Daoming, deputy Party chief of the province, have been placed under investigation since central government authorities began cracking down on corruption in late 2012. Most were investigated for alleged under-the-table deals with coal mine owners in Lyuliang, according to the anti-graft body.
Three of the officials under investigation had worked in the city. Two had been Party chief. Three officials at the city level, including the former mayor, Ding Xuefeng, and 10 businessmen have been placed under investigation since June.
The city's economic growth has relied heavily on the mining of coking coal, a scarce resource, and ongoing exploration was needed. As government officials colluded with businesses, a profit-sharing mechanism grew, experts have said.
Xin Libin, the owner of large mining operations in Lyuliang, set tongues wagging around the country by spending a reported 70 million yuan ($11 million) on his daughter's wedding in 2012, with dozens of local officials present at the ceremony.
Xin, one of the richest people in China, was investigated in March. A flurry of other corruption cases followed.
A new provincial leader was appointed in September, marking the start of a new effort to clean up the government.
Wang Rulin, former Party chief of Jilin province, has been appointed to oversee Shanxi province. The move was an effort to clean up rampant corruption by giving leadership to the head of the country's least corrupt province. Fifteen officials in Shanxi have been placed under investigation since Wang took office.
At a meeting on Tuesday, Wang urged all Party members to step up their efforts to stop corruption and create a clean political environment.